I have had numerous phone calls this past month where the client is asking the same question, "How much of a house can I qualify for?".
It is not rather how much house you can push the limits to qualify for, but rather one critical question, "What is your budget permit for a monthly housing payment"?
Creating a budget, knowing what your total expenses to live each month is essential to living.
Once you know your budget, the next question is, what is the amount of money you have set aside for a down payment and closing costs? Once this is determined, you can then back these variables into the financial calculator to determine how much of a house you can qualify for.
The majority of home owners ask for and can only afford a 30 year mortgage. Many people don't have the budget to pay on a shorter term (amortization) loan, such as a 10 year loan or even a 15 year payment or even a 20 year loan. So they just go with a 30 year mortgage and figure that this is the way to go. For many this is their only option for the time being. The ideal set of circumstances is to have as short of a term as possible so you can pay the least amount of interest as possible.
Having the proper planning in place before going shopping is not just picking a number out of the air and saying I want a house that is $250,000 calling a real estate agent and asking to go shopping to view a list of houses. Then three weeks later you find the house that you love, put an offer in, it gets accepted. Then you start the loan process and we as the loan officer now get the client coming to us after the process has started and we're told that the client has a maximum of 5% down payment yet they prefer 3% down payment. Oh, and they don't want their payments higher than a certain amount.
This is where the process with the planning was backwards from the beginning.
The client needs to know they must start from the very beginning to determine the amount to qualify for based upon what their monthly payments are, what their funds available for the transactiona and what their credit scores are.
Proper planning is key and essential for the clients, for eral estate agents and for the lenders to ensure smoothe transations as well as peace for those borrower the money from the financial industry until the house is paid off or sold at a future time in date. By not knowing the budget and sticking to it, financial challenges are much more likely to present themselves to those that go above and beyond their ability to meet their obligations each month.
One must be determiend to have the concious effort to stick to your budget and not go outside of where you can live comfortably to meet the financial demands of owning a home. Many home owners have expenses outside of what their income is and this is where financial challenges and where many relationship challenges begin is with a budget.
Once you know your budget and have your range set, then work the numbers backwards to know what range of houses to look at based on how much funds are set aside for buying a house to be your home.